- EUR/GBP moves higher as soft inflation outlook uplifts BoE early rate cut prospects.
- BoE Ramsden sees inflation remaining lower than BoE’s latest forecasts.
- ECB Villeroy is comfortable with the central bank pivoting to rate cuts from June.
The EUR/GBP pair rises to 0.8630 in Monday’s European session. The cross moves higher as investors hope that Bank of England (BoE) Deputy Governor Dave Ramsden will join policymaker Swati Dhingra and vote for a rate cut in the upcoming monetary policy meeting on May 9.
On Friday, Dave Ramsden commented that risks to United Kingdom inflation remaining persistent have receded and he expects price pressures could remain below BoE’s latest inflation forecasts. Ramsden added that he sees inflation remaining around BoE’s 2% target in the next three years and expects it won’t rise again as expected for later this year.
Soft inflation guidance from BoE Ramsden has boosted expectations for early rate cuts. Traders have priced out bets leaned towards the BoE pivoting to rate cuts in November and are expecting them now from August. The impact is visible in the Pound Sterling’s performance against the Euro.
Going forward, investors will focus on the UK S&P Global/CIPS preliminary PMI data for April, which will be published on Tuesday. The Services PMI is estimated to have declined slightly to 53.0 from 53.1. The Manufacturing PMI is expected to expand steadily by 50.3.
Meanwhile, the Euro will remain on the tenterhooks as investors see a move by the European Central Bank (ECB) to rate cuts as imminent. The ECB is projected to reduce interest rates three times this year as Eurozone inflation has softened significantly and the economic outlook is weak.
The expectations for ECB reducing rate cuts from June remains firm as French central bank head and ECB policymaker Villeroy de Galhau said on Thursday that they could cut rates in the next meeting, barring a major surprise. Villeroy emphasized returning to structural transformation as inflation is receding.